Solo Cup Operating Corporation v. Lollicup USA, Inc.

Filing 50

Opinion and Order Signed by the Honorable Joan H. Lefkow on 5/17/2017: Plaintiff's motion to dismiss counterclaims II, V, and VI and to strike affirmative defenses 3 and 9 35 is granted without prejudice; and Plaintiff's motion to dismiss counterclaims III, IV, and VII and to strike affirmative defenses 4 and 5 35 is granted with prejudice. Status hearing is set for 5/31/2017 at 09:30 AM.Mailed notice(mad, )

IN THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
SOLO CUP OPERATING CORPORATION,
Plaintiff,
v.
LOLLICUP USA, INC.,
Defendant.

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Case No. 16 C 8041
Judge Joan H. Lefkow

OPINION AND ORDER
Solo Cup Operating Corporation filed suit against Lollicup USA, Inc., alleging trademark
infringement and unfair competition under the Lanham Act, 15 U.S.C. §§ 1125(a) and 1114;
unfair competition under both the Illinois Uniform Deceptive Trade Practices Act, 815 Ill. Comp.
Stat. 510, and the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 Ill. Comp.
Stat. 505; and breach of contract under Illinois common law. (Dkt. 30 at 1.) In response, Lollicup
filed a number of counterclaims and affirmative defenses. (Dkt. 33 at 12–21, 40–51.) Solo Cup
now moves to dismiss several of the counterclaims and defenses. For the reasons stated below,
Solo Cup’s motion is granted. 1
BACKGROUND 2
Solo Cup has a registered product configuration mark, 3 Registration No. 3,284,076, for
its “Traveler” coffee-cup lid, pictured below.

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The court’s jurisdiction rests on 15 U.S.C. § 1121 and 28 U.S.C. §§ 1331. Venue is proper in the
Northern District of Illinois, Eastern Division, under 28 U.S.C. § 1391(b)(2) and (c)(2).
2

Unless otherwise noted, the facts described herein are taken from the Answer, Affirmative
Defenses, and Counterclaims to the Amended Complaint, (dkt. 33), and its supporting exhibits, (dkt. 33,
exs. A–E), and are accepted as true for the purposes of this motion. See Thompson v. Ill. Dept. of Prof’l
Reg., 300 F.3d 750, 753 (7th Cir. 2002) (citation omitted); Fed. R. Civ. P. 10(c).
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The lid is the subject of design and utility patents that expired in 2001 and 2003,
respectively. These two patents were disclosed to the Patent and Trademark Office (PTO) during
Solo Cup’s trademark registration application process.
Lollicup manufactures, advertises, and sells coffee cup lids under the brand name
“Karat.” Solo Cup alleges that Lollicup’s “Karat” lids infringe its product configuration mark. In
response to Solo Cup’s complaint, Lollicup filed numerous counterclaims and affirmative
defenses. Solo Cup moves to dismiss and strike some of those claims and defenses, including
Lollicup’s claims that (1) Solo Cup fraudulently procured the trademark registration for the
“Traveler” lid configuration in violation of 15 U.S.C. § 1120, rendering it subject to cancellation
under 15 U.S.C. §§ 1064 and/or 1119 (counterclaims II, V, and VI and affirmative defenses 3
and 9), (2) Solo Cup’s use of its product configuration mark on the “Traveler” lid constitutes
false advertising in violation of 15 U.S.C. § 1125(a) (counterclaim VII), and (3) the product

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A product configuration mark protects distinctive, non-functional product designs. Unlike
trademarks protecting words or logos, a product configuration mark protects the appearance of the
product itself. “Product configuration mark” is generally synonymous with “trade dress,” and the two
terms will be used interchangeably in this opinion.
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configuration trademark for the “Traveler” lid is invalid and unenforceable due to either
unconstitutionality or preemption (counterclaims III and IV and affirmative defenses 4 and 5).
LEGAL STANDARD
The legal standard applied to a motion to dismiss a counterclaim or strike an affirmative
defense is the same as the standard applied in a 12(b)(6) motion to dismiss for failure to state a
claim. See Intercon Sols., Inc. v. Basel Action Network, 969 F. Supp. 2d 1026, 1067 (N.D. Ill.
2013), aff'd, 791 F.3d 729 (7th Cir. 2015); Safe Bed Techs. Co. v. KCI USA, Inc., No. 02 C 0097,
2003 WL 21183948, at *2 (N.D. Ill. May 20, 2003). To survive such a motion, the non-fraud
counterclaims and affirmative defenses must “contain sufficient factual matter, accepted as true,
to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678,
129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544,
570, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007)). Lollicup’s fraud allegations must be stated with
particularity in accordance with Federal Rule of Civil Procedure 9(b). While factual allegations
must be accepted as true, legal conclusions will not be considered. See Iqbal, 556 U.S. at 678.
ANALYSIS
I.

Fraudulent Procurement (Counterclaims II, V, 4 and VI and Affirmative Defenses 3
and 9)
Fraudulent procurement of a trademark registration occurs where the applicant either

“withhold[s] from the Patent and Trademark Office . . . material information or fact which, if
disclosed to the Office, would have resulted in the disallowance of the registration sought or to
be maintained,” Northwestern Corp. v. Gabriel Mfg. Co., No. 95 C 2004, 1996 WL 732519, at
*16 (N.D. Ill. Dec. 18, 1996) (quoting First Int’l Servs. Corp. v. Chuckles, Inc., 5 U.S.P.Q.2d
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In counterclaim V, Lollicup also seeks declaratory relief under 15 U.S.C. § 1119, which grants
courts the power to order cancellation of registrations. This request for relief is premised on the same allegations of
fraudulent procurement as Lollicup’s claims under 15 U.S.C. §§ 1064 and 1120 (counterclaim VI), so the court will
not address it separately
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1628 (T.T.A.B. 1987)), or makes “a deliberate attempt to mislead the PTO into registering [the]
mark by presenting materially false and misleading information to the PTO when . . . seeking the
trademark registration.” Specialized Seating, Inc. v. Greenwich Indus., L.P., 472 F. Supp. 2d
999, 1016 (N.D. Ill. 2007) (citing Money Store v. Harriscorp Finance, Inc., 689 F.2d 666, 670
(7th Cir. 1982); Zip Dee, Inc. v. Dometic Corp., 900 F. Supp. 1004, 1009 (N.D. Ill. 1995)). 5
Lollicup alleges that Solo Cup fraudulently procured its product configuration trademark
registration by misrepresenting to or misleading the trademark examiner about whether the mark
was functional. Lollicup argues that, despite Solo Cup’s disclosure to the PTO of the expired
patents describing that mark, Solo Cup’s written and oral statements made during the trademark
application process regarding non-functionality constitute fraud. (See Dkt. 33 at 31–35; Dkt. 401 at 24–30. 6)
“[I]n general terms, a product feature is functional, and cannot serve as a trademark, if it
is essential to the use or purpose of the article or if it affects the cost or quality of the article.”
Traffix Devices v. Mktg. Displays, 532 U.S. 23, 32, 121 S. Ct. 1255, 149 L. Ed. 2d 164 (2001)
(internal quotation marks omitted) (citations omitted). The threshold inquiry in the Seventh
Circuit is “whether the feature for which trademark protection is sought is something that other
producers of the product in question would have to have as part of the product in order to be able
to compete effectively in the market.” W.T. Rogers Co. v. Keene, 778 F.2d 334, 346 (7th Cir.
1985). The existence of a utility patent that encompasses the product configuration claimed “is

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The Lanham Act allows a registered trademark to be cancelled where “its registration was
obtained fraudulently.” 15 U.S.C. § 1064(3). Additionally, 15 U.S.C. § 1120 creates civil liability for
false or fraudulent trademark registration.
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Throughout this opinion the page numbers referenced for Dkt. 40-1 are the document page
numbers, not the page numbers assigned by CM-ECF.
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strong evidence that the features therein claimed are functional,” but it is not dispositive on its
own. Traffix, 532 U.S. at 29.
Functionality is not a fact that can be withheld from the PTO but, rather, a determination
the examiner must make when evaluating the mark for registration. See e.g., Northwestern Corp.,
1996 WL 732519, at *4. Thus, in order for a party to commit fraud on the PTO with respect to
the functionality of a mark, the party must either withhold from the examiner information or
facts that are material to the determination of whether the mark is functional—as in Specialized
Seating, where a trademark applicant failed to disclose material utility patents to the PTO after
being requested to do so, 472 F. Supp. 2d at 1004, 1016–19—or present false or misleading
information that is material to the functionality determination.
Both parties acknowledge that Solo Cup disclosed the material patents to the PTO during
the trademark application prosecution. (See Dkt. 36 at 10; Dkt. 40-1 at 26.) Lollicup, however,
points to Solo Cup’s representations, made in the trademark application, that certain features of
its lid were ornamental, and argues they are inconsistent with representations made to the patent
examiner about those features’ functionality. (See Dkt. 33 ¶¶ 35–41.) But as any practitioner
before the PTO would likely concede, applications advocate for a result by highlighting facts that
are favorable. Where, as here, the trademark examiner was in a position to agree or disagree with
the characterizations contained in the application by studying the patent itself, such an argument
made by a trademark applicant does not give rise to a reasonable inference of fraudulent intent. 7

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Lollicup points to Costar Realty Info., Inc. v. Civix-Ddi, LLC, 946 F. Supp. 2d 766, 779 (N.D. Ill. 2013)
to argue that Solo Cup effectively withheld information contained within the utility patent by pointing out and
discussing some portions of the patent but not others. Costar, a patent case, is distinguishable, however, because
there the PTO had affirmatively requested assistance from the applicant in identifying relevant references. Lollicup
alleges no similar request here and, as such, has failed to allege adequate facts to support a reasonable inference that
Solo Cup’s discussion of some sections of the utility patent caused the examiner to fail to scrutinize the rest of it.

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Lollicup also challenges statements made by Steve Smith, Solo Cup’s Director of Product
Development, in his declaration submitted to the PTO in which he states (a) Solo Cup’s lid has
the same basic functional characteristics of competing lids and (b) Solo Cup’s configuration does
not affect the cost of manufacturing the lid to the disadvantage of others in the marketplace.
(Dkt. 33 ¶¶ 43, 45.) Lollicup alleges these statements are false and misleading because the patent
disclosure represents that the lid was designed “to be manufactured relatively inexpensively so as
to be disposable,” and the particular configuration was selected to avoid “unacceptable
difficulties in molding the lid.” (Id. ¶ 46.) Since Smith’s statements were made under oath, if
false, they could have been material to the examiner’s decision. But the statements characterize
the configuration in broad terms that are not demonstrably false nor directly contrary to the
patent disclosure. In any event, as stated, the examiner had the utility patent to read and was free
to demand explanation or more information before reaching a conclusion.
Under the pleading standard of Rule 9, Lollicup has failed to allege with sufficient
specificity facts that, if proved, would permit an inference of intent to deceive. Accordingly,
counterclaims II, V, and VI and strike affirmative defenses 3 and 9 must be dismissed.
II.

False Advertising Under 15 U.S.C. § 1125(a) (Counterclaim VII)
Solo Cup seeks dismissal of Lollicup’s claims that Solo Cup engaged in false advertising

by marking its product with a fraudulently obtained trademark, which Lollicup argues misleads
the public about whether Solo Cup has an exclusive right to sell lids with that configuration.
(Dkt. 40-1 at 20.)
To establish a claim of false advertising under the Lanham Act, a plaintiff must prove:
(1) a false statement of fact by the defendant in a commercial advertisement about
its own or another's product; (2) the statement actually deceived or has the
tendency to deceive a substantial segment of its audience; (3) the deception is
material, in that it is likely to influence the purchasing decision; (4) the defendant
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caused its false statement to enter interstate commerce; and (5) the plaintiff has
been or is likely to be injured as a result of the false statement, either by direct
diversion of sales from itself to defendant or by a loss of goodwill associated with
its products.
Hot Wax, Inc. v. Turtle Wax, Inc., 191 F.3d 813, 819 (7th Cir. 1999).
In addition to literally false statements, a party can run afoul of 15 U.S.C. § 1125(a) if it
makes statements that, while literally true, are misleading in context or likely to deceive
customers. See Hot Wax, 191 F.3d at 820. Numerous courts have noted that the Lanham Act “has
created a regime of strict liability with regard to false advertising claims.” Spotless Enters.,
Inc. v. Carlisle Plastics, Inc., 56 F. Supp. 2d 274, 278 (E.D.N.Y.1999); accord Vector Prods.,
Inc. v. Hartford Fire Ins. Co., 397 F.3d 1316, 1319 (11th Cir. 2005); Proctor & Gamble Co. v.
Chesebrough-Pond’s, Inc., 747 F.2d 114, 119 (2d Cir. 1984); Parkway Baking Co. Inc. v.
Freihofer Baking Co., 255 F.2d 641, 648 (3d Cir. 1958); Brandt Consol., Inc. v. Agrimar Corp.,
801 F. Supp. 164, 174 (C.D. Ill. 1992). Thus, a party’s intent, either when procuring a trademark
or using it in advertising, is irrelevant to the question of whether it has made a “false statement of
fact . . . in a commercial advertisement.” The only question is whether the “statement” is true and
not misleading at the time it is made. 8 Lollicup does not dispute that Solo Cup owns a registered
product configuration mark for its coffee lids. (Dkt. 30, Ex. 1.) Rather, Lollicup is challenging
the validity and enforceability of that registered mark. But until such time as the mark is held
invalid or unenforceable or is abandoned by Solo Cup, it is both valid and enforceable.
Therefore, Solo Cup’s use of the ® symbol on its registered lids cannot be a false statement of
fact prior to cancellation or abandonment of that mark.

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For the purposes of this motion the court assumes without deciding that misuse of the statutory
registration symbol is a form of false advertising. But cf. Li’l Red Barn, Inc. v. Red Barn System, Inc., 322 F. Supp.
98, 111 (N.D. Ind. 1970), opinion adopted, 174 U.S.P.Q. 193, 1972 WL 18062 (7th Cir. 1972) (“[W]hether or not a
mark is registered is entirely immaterial to the average member of the public.”).

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Neither can such use be misleading to customers when it causes them to believe Solo Cup
has an exclusive right to sell lids with that configuration because, so long as the trademark is
registered, Solo Cup does have such a right. Even if Lollicup succeeds in obtaining cancellation
of the trademark registration, such cancellation would be prospective and would not retroactively
render Solo Cup’s past use false or misleading. 9 Therefore, since Lollicup has failed to allege a
false statement of fact by Solo Cup, its claim of false advertising must fail and the court need not
address the remaining elements of a false advertising claim under 15 U.S.C. § 1125.
Counterclaim VII must be dismissed.
III.

Unconstitutionality and Preemption Under Federal Patent Law
“The Congress shall have the power . . . [t]o promote the Progress of Science and useful

Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their
respective Writings and Discoveries.” U.S. CONST. art. I, § 8, cl. 8. Lollicup argues that, because
trademark rights have no statutory durational limits, affording trademark protection to Solo
Cup’s previously patented coffee lid gives the holder an unlimited monopoly over the invention
in violation of the Patent Clause’s “limited times” restriction. (Dkt. 40-1 at 4–19.) Similarly,
Lollicup argues that the establishment of trademark rights in a previously patented product is
preempted by federal patent law in view of the Patent Clause. (Id.)
While early Supreme Court cases suggested the existence of a strong constitutional right
of the public to copy a product’s design upon expiration of a patent, recent precedent has
explained that this right is “far from absolute.” Thomas & Betts Corp. v. Panduit Corp., 138 F.3d
9

The patent cases Lollicup relies on in lieu of trademark precedent are in accord. See M-3 Assocs., Inc. v.
Cargo Systems, Inc., No, 99 C 547, 2004 WL 834690 (N.D. Ind. Mar. 18, 2004); Chrisha Creations Ltd. v. Gemmy
Indus. Corp., No. 03 C 8937 (S.D.N.Y. Nov. 1, 2004), vacated, Gemmy Indus. Corp. v. Chrisha Creations Ltd.,
452 F.3d 1353, 1360 (Fed. Cir. 2006). The court in M-3 held that the defendant could be liable for false marking and
false advertising where it marked its product with a patent that had previously been found to be invalid on the basis
of prior art. Likewise, the court in Chrisha granted a preliminary injunction barring a patentee from continuing to
mark its products with a patent the court had recently held to be invalid.

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277, 287 (7th Cir. 1998) (citing Compco Corp. v. Day–Brite Lighting, Inc., 376 U.S. 234, 237–
38, 84 S. Ct. 779, 11 L. Ed. 2d 669 (1964)); see also Kohler Co. v. Moen, Inc., 12 F.3d 632, 640
(7th Cir. 1993) (holding that federal patent law does not preclude federal trademark protection of
designs).
In Thomas & Betts, the Seventh Circuit decided the very issue now raised by Lollicup:
“[C]an a product configuration that is disclosed in an expired utility patent be protected as a trade
dress under the Lanham Act?” 138 F.3d at 283. The court answered this question affirmatively,
holding that “[t]here is no per se prohibition against features disclosed in a patent receiving
trademark protection after the patent has expired.” Id. at 288 (citing 1 J. Thomas McCarthy,
McCarthy on Trademarks § 6.12 (4th ed. 1996)). In so holding, the court noted that the policy
concerns underlying the patent clause’s “limited times” requirement are effectively dispelled by
application of the functionality doctrine:
The safeguard against an impermissible extension of a patent monopoly by a
trademark, as noted above, is the functionality doctrine: a configuration of an
article cannot receive trademark registration if its purpose is to contribute
functional advantages to the article or if the configuration results from functional
considerations.
Id. at 288 (citing Best Lock Corp. v. Schlage Lock Co., 413 F. 2d 1195, 1199 (C.C.P.A. 1969)).
Prevailing case law thus forecloses Lollicup’s arguments that trade dress protection for a
formerly patented product configuration is precluded by the Patent Clause and/or preempted by
the Patent Act. Therefore, counterclaims III and IV must be dismissed and affirmative defenses 4
and 5 must be stricken.
CONCLUSION
For the foregoing reasons, Solo Cup’s motion to dismiss counterclaims II, V, and VI and
to strike affirmative defenses 3 and 9 is granted without prejudice; and Solo Cup’s motion to

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dismiss counterclaims III, IV, and VII and to strike affirmative defenses 4 and 5 is granted with
prejudice.

Date: May 17, 2017

_____________________________
U.S. District Judge Joan H. Lefkow

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